COMMISSIONER OF INCOME TAX Vs. SVP INDUSTRIES LTD.

JUDGEMENT

(1.) BY order dated 28.04.2014, the following substantial question of law was framed in this appeal, which pertains to the Assessment Year 2004 -05:

(2.) THE respondent -Assessee during the relevant period was engaged in the business of manufacture and sale of alcohol and vanaspati. In addition, the assessee was having rental and interest income.

(3.) THE aforesaid reasoning records the stand of the respondent - Assessee that the excise duty had not been claimed as an expenditure in the profit and loss account and had not been included in the valuation of stock. This, the Assessing Officer held was contrary to the ratio of the Supreme Court in CIT Vs. British Paints Ltd. [1991] 188 ITR 44 (SC). The said reasoning is wrong and legally untenable, unless the respondent - assessee had included and treated the excise duty as an expenditure in the profit and loss account. In such cases, the entry in the profit and loss account is required to be matched or balanced with the corresponding increase in the valuation of the closing stock. In Commissioner of Income Tax, Tamil Nadu Vs. Dynavision Ltd. [2012] 210 Taxman 239 (SC), the Assessing Officer had made addition of Rs. 16,39,000/ - to the valuation of the closing stock on the ground that excise duty was payable but the plea of the Revenue was rejected observing as under: